Escolar Documentos
Profissional Documentos
Cultura Documentos
1. Solutions:
Requirement (a):
Home office books Branch books
Jan . 1, 20x1 Jan . 1, 20x1
Investment in branch……...500K Cash……………………...500K
Cash………………………….…500K Home office..…………… 500K
(a) (a)
Investment in branch……...100K Inventory…………………200K
Accounts payable……………100K Accounts payable 100K
Home office………………100K
(b) (b)
No entry Equipment………………120K
Cash……………………….120K
(c) (c)
Investment in branch……... 60K Equipment……………….60K
Accum. depreciation…..……300K Home office………………..60K
Equipment………………….. 360K
(d) (d)
No entry Cash ……………………..600K
Sales………………………600K
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(200K – 20K unsold)
Inventory…………………180K
(e) (e)
Cash…………………………..80K Home office……………80K
Investment in branch………..80K Cash……………………….80K
(f) (f)
Investment in branch………25K Expenses(150K + 25K) 175K
Expenses…………………….25K Depreciation expense…. 10K
Cash………………………150K
Accum. depn………………10K
Home office……………….25K
Requirement (b):
Investment in branch Home office
Jan. 1 500,000 500,000 Jan. 1
(a) 100,000 100,000 (a)
(c) 60,000 80,000 (e) 80,000 60,000 (c)
(f) 25,000 25,000 (f)
(g) 235,000 235,000 (g)
840,000 840,000
Requirement (c):
Cash 750,000
Inventory 20,000
Equipment 180,000
Accum. Depreciation (10,000)
Total assets 940,000
2
Sales 600,000
Cost of goods sold (180,000)
Gross profit 420,000
Expenses (175,000)
Depreciation expense (10,000)
Profit 235,000
2. Solution:
Home office Branch Combined
Cash 500,000 200,000 700,000
Accounts receivable 1,000,000 400,000 1,400,000
Inventory 680,000 300,000 980,000
Investment in branch 400,000 - -
Land 2,000,000 2,000,000
Building-net 4,000,000 4,000,000
Total assets 8,580,000 900,000 9,080,000
3. Solutions:
Requirement (a):
Home office books Branch books
(a) (a)
Investment in branch……...470K Shipments from HO…..450K
(300K x 150%) + 20K Freight-in……………… 20K
Shipments to branch…….. 300K Home office…………… 470K
Allowance for mark-up…… 150K
Cash………………………… 20K
(b) (b)
No entry Purchases……………..100K
Freight-in…………………2K
Cash……………………….102K
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(c) (c)
No entry Cash…………………..500K
Sales………………………500K
(d) (d)
Inventory – end.,,,,,,, 235K
(470K x ½)
Income summary……..235K
Requirement (b):
Sales 500,000
Cost of goods sold:
Shipments from HO 450,000
Freight-in 22,000
Purchases 100,000
Ending inventory (235,000) (337,000)
Individual gross profit 163,000
Requirement (c):
Sales 500,000
Cost of goods sold:
Shipments from HO 300,000
Freight-in 22,000
Purchases 100,000
Ending inventory (160,000) (262,000)
Individual gross profit 238,000
Requirement (d):
150,000 allow. for markup x 50% sold = 75,000
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PROBLEM 11-3: EXERCISES
1. Solutions:
Requirement (a):
Home office books Branch books
Jan . 1, 20x1 Jan . 1, 20x1
Investment in branch……...600K Cash……………………...600K
Cash………………………….…600K Home office..…………… 600K
(a) (a)
Investment in branch……...25K Prepaid supplies………100K
Accounts payable…………… 25K Accounts payable …………75K
Home office……………… 25K
(b) (b)
No entry Equipment………………80K
Cash……………………….80K
(c) (c)
Investment in branch……...120K Equipment……………….120K
Accum. depreciation…..…… 80K Home office………………120K
Equipment………………….. 200K
(d) (d)
Accounts payable……..25K No entry
Cash………………………….25K
(e) (e)
No entry Accounts payable ………50K
Cash……………………….50K
(f) (f)
No entry Cash ……………………..800K
Service fees………………800K
(g) (g)
Cash…………………………..180K Home office……………180K
Investment in branch………180K Cash……………………….180K
(h) (h)
Investment in branch………60K Expenses……………… 250K
Expenses…………………….60K Depreciation expense…. 40K
Advertising expense …….60K
Supplies expense………..95K
Cash………………………250K
Accum. depn………………40K
Home office……………….60K
Prepaid supplies…………. 95K
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(i)Closing entries: (i) Closing entries:
Service fees…………….800K
Expenses……………… 250K
Depreciation expense…. 40K
Advertising expense …….60K
Supplies expense………..95K
Income summary……….. 355K
Investment in branch…..355K
Income summary…………….355K Income summary………355K
Home office……………355K
Requirement (b):
Investment in branch Home office
Jan. 1 600,000 600,000 Jan. 1
(a) 25,000 25,000 (a)
(c) 120,000 180,000 (g) 180,000 120,000 (c)
(h) 60,000 60,000 (h)
(i) 355,000 355,000 (i)
980,000 980,000
Requirement (c):
Cash 840,000
Prepaid supplies 5,000
Equipment 200,000
Accum. Depreciation (40,000)
Total assets 1,005,000
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2. Solution:
Home office Branch Combined
Cash 600,000 240,000 840,000
Accounts receivable 1,200,000 480,000 1,680,000
Inventory 816,000 360,000 1,176,000
Investment in branch 480,000 - -
Land 2,400,000 - 2,400,000
Building-net 4,800,000 - 4,800,000
Total assets 10,296,000 1,080,000 10,896,000
- - -
Accounts payable 4,800,000 600,000 5,400,000
Ordinary share capital 2,400,000 - 2,400,000
Share premium 240,000 - 240,000
Retained earnings 2,856,000 - 2,856,000
Home office - 480,000 -
Total liabilities & equity 10,296,000 1,080,000 10,896,000
3. Solutions:
Requirement (a):
Home office books Branch books
(a) (a)
Investment in branch……...500K Shipments from HO…..480K
(400K x 120%) + 20K Freight-in……………… 20K
Shipments to branch…….. 400K Home office…………… 500K
Allowance for mark-up…… 80K
Cash………………………… 20K
(b) (b)
No entry Purchases……………..80K
Freight-in…………………2K
Cash……………………….82K
(c) (c)
No entry Cash…………………..600K
Sales………………………600K
(d) (d)
Inventory – end…… 125K
(500K x ¼ )
Income summary……..125K
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Requirement (b):
Sales 600,000
Cost of goods sold:
Shipments from HO 480,000
Freight-in 22,000
Purchases 80,000
Ending inventory (125,000) (457,000)
Individual gross profit 143,000
Requirement (c):
Sales 600,000
Cost of goods sold:
Shipments from HO 400,000
Freight-in 22,000
Purchases 80,000
Ending inventory (105,000) (397,000)
Individual gross profit 203,000
Requirement (d):
80,000 allow. for markup x ¾ sold = 60,000
4. Answer: 250,000 - Only the sales by the branch to outside parties. Intra-
company billings are eliminated in the combined financial statements.
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PROBLEM 11-4: CLASSROOM ACTIVITIES
ACTIVITY #1:
Solutions:
Requirement (a):
Home office books Branch books
Jan . 1, 20x1 Jan . 1, 20x1
Investment in branch……...10M Cash……………………...10M
Cash………………………….… 10M Home office..…………… 10M
(a) (a)
Investment in branch……...30M Land………………………10M
Cash………………..………… 30M Building…………………..20M
Home office……………… 30M
(b) (b)
Investment in branch……20.5M Shipments from HO……20M
Shipments to the branch……..20M Freight-in………………..500K
Cash………………………… 500K Home office…………… 20.5M
(c) (c)
Investment in branch……... 5M Shipments from HO…… 5M
Shipments to the branch……. 5M Freight-in………………..100K
Home office……………… 5M
Cash………………………100K
(d) (d)
Equipment…………… 900K Home office……………900K
Investment in branch……900K Cash………………………900K
(e) (e)
No entry Furniture………… ……600K
Cash………………………600K
(f) (f)
No entry Purchases…………….. 10M
Accounts payable………..10M
(g) (g)
No entry Cash……………………50M
Accounts receivable….50M
Sales…………………….100M
(h) (h)
Cash…………………………10M Cash……………………30M
Investment in branch………10M Home office…………...10M
Accounts receivable……..40M
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(i) (i)
Cash…………………….35M Home office……….35M
Home office………………….35M Cash…………………….35M
(j) (j)
No entry Accounts payable……8M
Cash…………………..8M
(k) (k)
Expenses…………………1M Expenses……………14M
Investment in branch………..1M Home office………….1M
Cash…………………..15M
(l) (i)
Investment in branch……3M Expenses………………3M
Expenses……………………….3M Home office……………3M
Income summary……53.865M
Home office…………53.865M
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Requirement (b):
Investment in branch Home office
Jan. 1 10,000,000 10,000,000 Jan. 1
(a) 30,000,000 900,000 (d) 900,000 30,000,000 (a)
(b) 20,500,000 10,000,000 (h) 10,000,000 20,500,000 (b)
(c) 5,000,000 35,000,000 (i) 35,000,000 5,000,000 (c)
(l) 3,000,000 1,000,000 (k) 1,000,000 3,000,000 (l)
(o) 135,000 135,000 (o)
(p) 53,865,000 53,865,000 (p)
75,600,000 75,600,000
Requirement (c):
Cash 30,400,000
Accounts receivable 10,000,000
Inventory 7,675,000
Land 10,000,000
Building 20,000,000
Accum. Depn. - Bldg. (1,000,000)
Furniture 600,000
Accum. Depn. - Furniture (75,000)
Total assets 77,600,000
Sales 100,000,000
Cost of goods sold:
Shipments from HO 25,000,000
Freight-in 600,000
Purchases 10,000,000
Ending inventory (7,675,000) (27,925,000)
Gross profit 72,075,000
Expenses (17,000,000)
Depreciation expense (1,210,000)
Profit 53,865,000
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ACTIVITY #2:
Solutions:
Requirement (a):
Home office books Branch books
(a) (a)
Investment in branch……200 Shipments from HO……200
Shipments to the branch……..200 Home office…………… 200
(b) (b)
Investment in branch……... 100 Cash……………… 150
Cash………………………... 100 Home office……………… 150
(c) (c)
No entry Home office……… 20
Cash (or Expense) …… 20
(d) (e)
Investment in branch …………10 No entry
Expense……………………….10
Requirement (b):
Investment in branch Home office
Jan. 1 1,000 1,000 Jan. 1
(a) 200 (a) 50 200 (a)
(b) 100 (c) 20 150 (b)
(d) 10
1,310 1,280
Difference = 30
Requirement (c):
Home office books Branch books
(a) (a)
Shipments to the branch….. 50
Investment in branch……….. 50
(b) (b)
Home office……….. 50
Cash………………………. 50
(c) (c)
Expenses…………….. 20
Investment in branch………..20
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(d) (d)
Expense 10
Home office………………10
Requirement (d):
Investment in branch Home office
Unadj. 1,310 1,280 Unadj.
50 (a) (b) 50
20 (c) 10 (d)
1,240 1,240
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